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Contracts 📑

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Author: Sarah Nadon - Law Student
Edited By: Ryan Carson

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A contract is a legal agreement between two individuals that gives rise to an obligation that is able to be enforced by the courts. A contract, to be valid, requires the meeting of the minds of all parties to the contract; this is known as consensus ad idem. While it is difficult to interpret what anyone is truly thinking, the courts have resulted to the objective test of the reasonable man. Therefore, despite the intention of one of the parties to the contract, if they act in a way that a reasonable person would while entering into an agreement, the contract will be fully enforceable.

For a contract to be legally enforceable, it must also contain an offer, acceptance, competent parties and consideration.

An offer is one party conveying to the other party their willingness to enter into a legally binding agreement. Inside of an offer, there must be something that demonstrates who the offer was made to, a statement of intent into entering into a contract and specific terms of the offer. A statement of intention to benefit another person is not considered to be an offer to contract because of the danger of converting vague expressions into binding contracts.1 If any of the above three elements are missing, then an offer was not made.

Acceptance occurs when one party accepts and consents to the terms of the proposed offer. The acknowledgement of receipt of offer does not constitute acceptance. The acceptance of the offer must be in the form which the offeror requests; this is most commonly in writing. The general rule of acceptance is that the acceptance is not legally binding until it is communicated to the offeror. A legally binding contract must have consideration. Consideration is a critical element of the formation of a contract. Consideration means that both parties to the contract must exchange something of value. The value exchanged can be money, a promise to do something or a promise to refrain from doing something.

Finally, to enter into a contract, one must have the full legal capacity to do so. Minors (under the age of 18), mentally incapacitated or intoxicated individuals (someone incapable of understanding what he or she is doing) aren’t capable of entering into a valid contract. If a person is mentally incompetent, the contract they enter into is voidable if they are capable of proving that the other party knew the incapacity. Even if the other party did not have the knowledge, the contract might not be valid unless it can be proved that the contract was fair and bona fide.

Contracts are all over the place and are vital in today’s world. They demonstrate one’s commitment and can aid in preventing conflicts between parties. It is important to understand the elements of a contract before entering into one. Should you need assistance in understanding a contract, it is important to seek legal advice.

Disclaimer

The content on this web site is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this web site are advised to seek specific legal advice by contacting members of Carson Law, Carson IP, or their own legal counsel regarding any specific legal issues. Carson Law does not warrant or guarantee the quality, accuracy or completeness of any information on this web site. The articles published on this web site are current as of their original date of publication, but should not be relied upon as accurate, timely or fit for any particular purpose.

References

1 Wingrove v. Wingrove (1915), 8 O.W.N. 21 (Ont. H.C.); affirmed (1915), 8 O.W.N. 471 (Ont. C.A.).